Given that there are thousands upon thousands of funds and trillions of dollars under management, mutual funds are a critical component of the investment scene. Many investors have a large percentage (if not all) of their retirement savings in these vehicles and though there is little need for day-to-day assessment, a periodic review is worthwhile. To that end, then, it is worth exploring where mutual fund investors saw the worst returns for 2011.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Readers should note that this was written with two weeks left in December, and final results may be somewhat different. Moreover, this analysis includes only funds that are open to new investment, have minimum initial investment requirements below $10,000, and assets under management of at least $100 million. (You might be carrying more risk than you think if your fund invests in derivatives. For more, see A Brief History Of The Hedge Fund.)

Emerging Markets Get Submerged
Stock markets across the developing world were weak in 2011, especially in Asia, and it is no surprise that funds focused on those areas top the list of under-performers. The Oberweis China Opportunities fund lost almost 39% in 2011 and the Dreyfus Greater China was scarcely better.

Similar performance can be found in the Eaton Vance Greater India fund, as well as the Matthews India Investor and John Hancock Global Opportunities funds.

Indiscreet Returns
Unfortunately, a few more generalist and discretionary mutual funds appear higher-up on the list of top underperformers than on the top performers list. Bill Miller's Legg Mason Capital Management Opportunity fund had a lousy year, losing about 35% of its value in 2011. Fairholme was likewise a notable laggard this year, losing almost 30% for the year, while CGM Focus fell about 27%.

Not so Resourceful
After sifting through dozens of underperforming emerging market and international funds, investors will also see that there were plenty of weak resource-oriented funds in 2011. The Oppenheimer Gold & Special Minerals Fund dropped more than 25%, as did the Franklin Gold and Precious Metals fund.

The Bottom Line
With the clock running out on 2011, investors should consider whether it is time to take their losses and move on in 2012. With tightly-focused funds like the resource or precious metal funds, it all comes down to investor expectations about metals prices in 2012 and the extent to which they value these funds for their diversification potential. For the emerging markets funds, though, there is an argument to hang on (or for newcomers to buy) for what still looks like above-average long-term potential. (For related reading on emerging markets, see The Risks Of Investing In Emerging Markets.)

Among some of the better-regarded funds, investors may want to look at names like Cambiar Aggressive Value, Nuveen Tradewinds Global Resources and Royce Global Value as holdings that have had a bad year, but could rebound in the years to come.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Stephen Simpson did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    Mutual Funds Are Not FDIC Insured: Here Is Why

    Find out why mutual funds are not insured by the FDIC, including why the FDIC was created and how to minimize your risk with educated mutual fund investments.
  2. Professionals

    How to Sell Mutual Funds to Your Clients

    Learn about the various talking points you should cover when discussing mutual funds with clients and how explaining their benefits can help you close the sale.
  3. Professionals

    Tax Efficient Strategies for Mutual Funds

    Before you sell mutual fund shares, consider these tax strategies first.
  4. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  5. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  6. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  7. Mutual Funds & ETFs

    Is Your Financial Advisor Picking the Right Mutual Funds?

    Learn about the different types of mutual funds and how to know if your financial advisor is choosing the right funds for you based on your investment goals.
  8. Mutual Funds & ETFs

    Understanding Lipper Ratings in Mutual Funds

    Take a closer look at the Lipper rating system for mutual funds and exchange-traded funds (ETFs), how investors should interpret it, and some possible criticisms.
  9. Mutual Funds & ETFs

    How to Find Mutual Funds With High Dividends

    Learn about the important factors to consider when looking for mutual funds that pay high dividends, including how they may impact your taxes.
  10. Mutual Funds & ETFs

    The Basics of How Mutual Funds Are Rated

    Learn how the major rating agencies assign mutual fund ratings. Understand what these ratings measure and how they are different from each other.
  1. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  2. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  3. Do financial advisors get paid by mutual funds?

    Financial advisors are reimbursed by mutual funds in exchange for the investment and financial advice they provide. A financial ... Read Full Answer >>
  4. Why is fiduciary duty so important?

    Fiduciary duty is one the most important professional obligations. It basically provides a much-needed protection for individuals ... Read Full Answer >>
  5. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>
  6. Why do financial advisors have a fiduciary responsibility?

    Financial advisors governed by fiduciary duty are bound by law to act in the best interests of their clients at all times. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!